2022 Tax Day Tips
4min video.
Happy Tax Day! 💸💰🎉 As we wrap up the tax season, here are some essential things to keep in mind for your 2022 taxes. #TaxSeason #TaxTips #IRAs #TaxCredits #Deductions #EVTaxCredit #MichiganTax #TaxPlanning #CFP #EnrolledAgent #AvoidOverpaying #MoneyMatters 💰💬
Video transcript.
Happy Tax Day. If you like treating your taxes like cramming for a midterm paper and waiting until the last minute to file – here are a few things to consider for last year’s taxes.
Let's first talk about IRA and Roth IRA contributions. Most people don’t know that they can still contribute for the 2022 tax year until this year's deadline, which is today. And deciding between the two can be tricky, so don’t hesitate to reach out if you have questions.
2022 was a reset for taxes, like a reboot of a bad TV show. Many tax benefits during the pandemic expired and no longer apply this tax filing season, such as the enhanced child tax credit. Parents who received $3,600 per child during the pandemic will now get $2,000, only available for parents under 17.
During the pandemic, the IRS also expanded the child and dependent care credit to help working parents pay for childcare. But it has now returned to a maximum of $2,100 instead of $8,000 for parents with multiple children. Fewer filers will be able to qualify for these credits because the income qualification has reverted to what it was before the pandemic.
For charitable deductions, only those who itemize can now deduct charitable payments, and the adjusted gross income ceiling on charitable cash contributions is back to its usual 60 percent.
But, hey, let's focus on the bright side. There are some tax breaks to take advantage of, like the electric vehicle tax credit. If you bought one in 2022, you could get a credit of up to $7,500. Just ensure it was assembled in North America after August 16, 2022.
Also, for those of you living in Michigan, based on recently finalized financial data from last year, the Michigan income tax rate decreased from 4.25% to 4.05% for 2023. This isn’t a permanent change to the income rate, as it's expected to return to 4.25% on January 1st, 2024. So not for last year, but looking ahead to 2023.
Finally, remember to consider tax losses. If you had after-tax investments last year, chances are you had some losses. Hopefully, you engaged in tax-loss harvesting to book these paper losses! Even if you took $20,000 in losses, you could still use $3,000 to offset your ordinary income. The remaining $17,000 of capital losses carry over to future years. This would be reflected on your 1099 from your custodian, so remember to include this when you file.
Getting money back from the IRS may seem reasonable, but it means you overpaid your taxes! With interest rates rising, every dollar you overpaid could have earned interest for you instead of the IRS. So, adjust your withholding this year to avoid overpaying again. Don't give the government an interest-free loan! So, there you have it! Remember, the deadline to file your 2022 tax return or request a six-month extension is today, April 18th, but you'll still need to pay any taxes you owe to avoid penalties or fees. It’s an extension to file, not an extension to pay. You should be aware of these essential things before the tax deadline.
And lastly, in continuation of my original mission when launching my firm three years ago to provide the best service possible, in addition to being a CFP, I’ve now passed all three exams required and have been admitted to practice as an enrolled agent before the IRS, which is the highest credential awarded by the IRS. So next year, we will offer tax prep for many of our clients as a one-stop shop service, with the idea being that we are doing so much proactive tax planning already that the formality of actually filing the return seems more than a logical continuation of providing a best in class service model.
So with that said, happy tax day, Don't hesitate to contact me if you have any questions!
Take care, and stay on point!
